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DOF Puts Post-Redevelopment Coal In Cities' Stockings

The holiday season continues to be a cruel time of year for California's redevelopment community. Last year, the state Supreme Court struck a blow on Dec. 29, allowing the state to abolish redevelopment agencies. And this year, on Dec. 18, the state Department of Finance denied funding to many of the 240 of the 400 successor agencies who had appealed earlier rejections.

The latest denial included funding for such high profile projects as site acquisition for a new downtown stadium for the San Diego Chargers football team, and $30 million to be used for a new stadium for the San Francisco 49ers, which is already under construction in Santa Clara.

It's all added up to more pain for California cities who want to continue projects planned before redevelopment ended on Feb. 1. Cities are forced to confront the Department of Finance, which is tasked with taking money out of redevelopment and into other pressing state needs, such as schools.

The Dec. 18 news from the Department of Finance followed appeals by 240 of the state's 400 successor agencies. Finance released its list just before the holidays, bringing little holiday cheer to many. Up and down the state, the news was grim. In Ventura County, the city of Oxnard lost out on a $15.3 million loan for a $40 million affordable housing project, while nearby in Thousand Oaks, the city denied $7.7 million for improvements to its auto mall.

The story is similar throughout the state, although it's not all bad news. San Diego, which had requested $76.6 million in recognized obligation payment schedules to pay redevelopment projects for the first half of 2013, received $30 million, according to UT San Diego, and Escondido, which requested $7.8 million, received $3 million. While Thousand Oaks was denied money for its auto mall upgrades, an appeal for $2.4 million in low-income housing funds was granted by the Department of Finance, according to the Ventura Star.

Modesto, too, had some holiday cheer. The Department of Finance's latest ruling allowed it to pay $3 million in property tax revenue to pay for two downtown parking garages built in the 1980s and 1990s, following that city's appeal.

The newest funding information followed passage of AB 1484, which allowed successor agencies the right to meet and confer, or basically appeal Department of Finance decisions announced earlier.

Out of 400 successor agencies in the state, 240 of them requested meet and confer sessions after DOF ruled on their Recognized Obligation Payment Schedules in mid-October, said H.D. Palmer, a spokesman for the department.

Why have the successor agencies had so much trouble?

"The short answer is, it's based upon the law," said Palmer. "A number of requests have been made that don't comply or comport with the law."

Many of the disputes are expected to end up in court. The issues in Santa Clara and the 49ers Stadium are headed towards a March 22 legal battle in Sacramento County Superior Court. In Southern California, Los Angeles attorney Murray Kane, whose law firm of Kane, Ballmer & Berkman specializes in redevelopment law, said his firm will be filing litigation this month.

Kane, who declined to disclose his clients, said one issue is "what is an enforceable obligation." He said the DOF is also demanding "payment of affordable housing money already earmarked for projects." In some cases, he said, the department is "threatening not to pay even where enforceable obligations have already been approved."

Kane declined to disclose where the lawsuits would be filed, but added "cities want to be able to pay their bills."

In Santa Clara County, many of the cities have had disputes with the Department of Finance, over redevelopment money, including San Jose, Morgan Hill, Santa Clara and Milpitas, said Kevin Duggan, former city manager of Mountain View.

"This was like a tsunami change for those cities, a huge and dramatic change," he said.

Mountain View is one of the few cities in the county without a redevelopment dispute with the Department of Finance, noted Duggan, who chairs Mountain View's oversight board, which are the boards set up to oversee the successor agencies.

"Mountain View has some of the fewest challenges of redevelopment because we were in the winddown phase, he said, explaining the city's redevelopment agency was already planning to close down before the state ended redevelopment.

But other cities, he noted, have long-term projects at risk, ranging from affordable housing to infrastructure and street renovation.

In another ongoing dispute, the city of Santa Barbara is fighting the state agency over its order to sell downtown parking garages due to how they were financed. City officials traveled to Sacramento in mid-December to make their case.

In Orange County, city officials in 17 cities are being pressured by the Department of Finance to redirect more than $200 million to schools and special districts, according to the VoiceofOC website. Santa Ana is said to owe $56 million.

One of the most significant problems caused by the demise of redevelopment may be the uncertainty it creates, according to San Jose City Councilman Sam Liccardo, whose district includes the city's downtown.

"The manner that the Department of Finance is dealing with prior transactions creates a cloud on the title of virtually every parcel transaction by the former redevelopment agency," he said.

The disputes aren't surprising to Dan Carrigg, legislative director of the California League of Cities. "The governor has been quite clear that he wants redevelopment to end and the money to go to other programs," he said. "Finance is implementing the objectives of the governor."

Carrigg said the cities view redevelopment as a way to meet other state objectives, such as providing affordable housing and transit-oriented development. With the apassage of Proposition 30 and the ascendance of a super majority of Democrats in the state legislature, he noted, that additional money and a change in state laws may help resolve some of the problems.

Liccardo said he expects the next legislature to "find a way forward" on affordable housing programs that were hit by the demise of redevelopment. Despite San Jose's setbacks at the loss of redevelopment, he hinted at the possibility of several new high rise towers being proposed for his city in the new year.